Bernstein Shur Business and Commercial Litigation Newsletter #74

FIRM NEWS2 Apr 2024 Shareholder Lindsay Milne Quoted About Subchapter V Being an Antidote for Distressed Small Businesses in a High Interest Rate Environment

In a recent opinion, the U.S. Supreme Court has limited the scope of personal jurisdiction over corporate defendants.

In BNSF Railway Co. v. Tyrrell, the Court addressed a lawsuit brought by parties from South Dakota against the Montana-based BNSF Railway Company. The action, brought by an individual and the executor of her husband’s estate, was based on allegations that the decedent developed a fatal cancer from his exposure to carcinogenic chemicals while working for BNSF. The case was consolidated with a second Montana suit involving a work-related injury to a resident of North Dakota. Neither injury occurred in Montana. In response to suit, BNSF moved to dismiss the cases, arguing that BNSF was not subject to personal jurisdiction in Montana. Following a ruling from the Montana State Supreme Court that jurisdiction existed over BNSF, the U.S. Supreme Court reversed. In its opinion, the U.S. Supreme Court noted that courts may exercise general personal jurisdiction over out-of-state corporation where their “affiliations with the State are so ‘continuous and systematic’ as to render them essentially at home in the forum State.” Generally, a corporate defendant is “at home” in the state(s) where it is incorporated and maintains its principal place of business, but in “exceptional” cases, a corporate defendant’s contacts with another state “may be so substantial and of such a nature as to render the corporation at home in that State.” In the case at hand, BNSF was neither incorporated in Montana nor headquartered there, and maintained less than 5% of its work force and about 6% of its total track mileage in Montana. The Supreme Court found that such contacts were not sufficiently substantial to subject BNSF to jurisdiction in Montana. It should be noted that if the injuries had occurred in Montana, a different analysis would apply; the Supreme Court’s analysis applies only where a plaintiff’s injuries do not arise out of the defendant’s specific contacts with the forum state.

The U.S. Supreme Court has clarified that the Hague Service Convention permits service of process on foreign defendants by mail.

In Water Splash v. Menon, the plaintiff Water Splash, Inc. sued the defendant Menon, a former employee, in Texas state court. Water Splash alleged that Menon began working for a competitor while still employed by Water Splash. Menon was a resident of Canada, so Water Splash obtained permission from the Texas court to serve the summons and complaint on Menon by mail. After Menon failed to appear and defend the lawsuit, Water Splash obtained a judgment by default. Menon subsequently moved to set aside the default judgment on the ground that she had not properly been served. She argued that the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, the Hague Service Convention, did not provide for service by mail as one of the expressly approved methods of service on foreign defendants. After the trial court denied Menon’s motion to set aside the default, the Texas court of appeal overturned the trial court’s decision. However, the U.S. Supreme Court reversed the decision of the court of appeals, finding that the Convention permitted service by mail if such service is permissible in the jurisdiction in which the action is pending. In other words, the Convention permits such service, but does not affirmatively authorize such service. The Court remanded the matter to the Texas court to determine whether Texas law authorized service by mail under the circumstances.

Regulators in the European Union have hit Google with antitrust penalties totaling more than $2 billion based on the company’s practice of favoring sponsored results in response to internet searches.

The EU levied the fines and also provided 90 days for Google to cease the practices related to search results that have resulted in the enforcement action. In 2010, Google’s competitors complained to regulators that the Company’s search engine improperly promoted products that were sold on Google Shopping, the company’s sales portal. Unveiling the penalties, the EU stated that Google improperly manipulated results for comparison shopping services, favoring those from its own service over those of competitors. The fine, which totaled 2.4 billion euros, was one of the largest ever issued by the European Commission. If Google does not change its practices within 90 days, it will face an additional daily penalty equivalent to 5 percent of daily revenues.

The Ninth Circuit Court of Appeals has held that minor league baseball remains exempt from U.S. antitrust statutes.

Professional baseball has remained exempt from federal antitrust laws as a quirk of history and based on long-standing precedent. In 1922, the U.S. Supreme Court, in Federal Baseball Club of Balt. v. National League, held that professional baseball was exempt from antitrust statutes because it did not constitute a form of interstate commerce. Although the business of baseball has changed since 1922, the U.S. Supreme Court repeatedly has declined to eliminate the baseball exemption, which has been described as “a derelict in the stream of law.” In such cases, the Court acknowledged that baseball implicated interstate commerce, but left it to Congress to eliminate the antitrust exception. In 1998, Congress enacted the Curt Flood Act, which removed the antitrust exemption as pertaining to employment of major league players, while also maintaining the exemption for minor league players. In the recent case, Miranda v. Selig, the Court addressed claims of minor league players that major league baseball’s employment practices addressed to minor league players artificially and illegally depressed minor league salaries. In support of their claims, the players noted that the average major league salary exceeded $500,000, while most minor league players earned less than $10,000 per year. Relying upon the minor league exemption contained in the Curt Flood Act, the Ninth Circuit Court of Appeals affirmed the trial court in dismissing the plaintiffs’ claims based on the clear terms of the statute.
Read more about this development here.